Good morning. David Meyer here, filling in for Alan from Berlin.
It’s another tough week for Boeing, which is facing increased scrutiny from aviation regulators and a bunch of huge compensation claims over the grounding of its 737 Max fleet and delivery delays.
Tomorrow, global regulators will meet in Texas to discuss Boeing’s bid to get its planes back in service—the company has rolled out software updates to the 737 Max jets and wants to start training pilots on the changes.
The updates and training should, Boeing hopes, reduce the likelihood of bad sensor data accidentally triggering the aircraft’s anti-stall mechanisms, which may be what caused the fatal Lion Air and Ethiopian Airlines crashes (though Boeing’s shares are currently up following a report saying a bird strike may have caused the Ethiopian Airlines disaster.)
Boeing’s problem is that the 737 Max saga is changing the regulatory landscape. Until now, it’s been standard practice for all major air regulators to green-light a plane if one of them certifies it as airworthy. But the Federal Aviation Administration now has a “credibility problem,” as House aviation subcommittee chair Rick Larsen put it during a hearing last week, following reports that the FAA had given Boeing employees too much of a role in its certification of Boeing’s planes.
The European Aviation Safety Agency is now unwilling to take the FAA’s word for it when it comes to certifying Boeing. As reported by the Financial Times, EASA said it would have to approve and mandate Boeing’s design changes itself, and judge whether pilots have been “adequately trained” in them, before allowing the 737 Max back into European skies. That could mean a slowdown of the planes’ redeployment.
Meanwhile, Boeing is facing yet more calls for compensation. Earlier this week, Ryanair chief Michael O’Leary added his voice to the throng of those calling for a payout, due to 737 Max delivery delays. But now China’s biggest three airlines—Air China, China Southern and China Eastern—have filed claims for compensation over the grounding and over delivery delays. China operates the world’s biggest 737 Max fleet, so this is going to hurt.
Perhaps we can even expect the Boeing narrative to blend into that of the U.S.-China trade war, which shows no sign of improvement. One Trump administration official told the FT that the regulatory splintering over the 737 Max affair could give China an opportunity to “start shutting out U.S. airplanes, as a way to boost its own aircraft manufacturing industry.”
More news below. And incidentally, Fortune‘s Aaron Pressman has a great piece out this morning about defense contractor Leidos (No. 311 on the Fortune 500 list,) which built an A.I.-powered ship that sailed from San Diego to Hawaii and back without pesky human guidance. Have a read, and do savor the headline.
A federal judge has backed the Federal Trade Commission in its antitrust case against chip giant Qualcomm, ruling that the company, which dominates the cellphone-chip industry, “strangled competition” with its patent licensing practices. Qualcomm will likely appeal the ruling, which says it has to change how it calculates royalties and license its patents to rivals at fair and reasonable prices. Wall Street Journal
ARM and Huawei
The British phone-chip-design giant ARM has told staff that the U.S. clampdown on Huawei means it has to stop trading with the company. If this blockage continues in the long-term, that means Huawei’s phone business—the second-biggest in the world—is almost certainly toast. Most phone processors out there are based on the SoftBank-owned company’s designs. BBC
Ding dong, Natura Cosméticos calling! The Brazilian owner of the Body Shop is reportedly set to buy Avon Products in an all-stock deal that will give it 76% of the combined group, with the rest being in the hands of Avon’s shareholders. Struggling Avon’s equity value was about $1.4 billion at the close of yesterday’s trading, but the Natura deal will value it at over $2 billion. Financial Times
The U.K.’s second-biggest steel producer, British Steel, is reportedly set to go under after failing to secure a $38 million loan from the government. That could mean the loss of 5,000 jobs at the company and 20,000 jobs in its supply chain. Reuters
Around the Water Cooler
Dollar General now has more stores than any other U.S. retail chain and—despite offering little in the way of e-commerce—it’s on its 29th straight year of same-store sales growth. Why so successful? As one analyst told Fortune‘s Phil Wahba, the Great Recession brought all income demographics to the bargain-basement door, and many people are still coming. Fortune
The international money transfer operation TransferWise carried out a second share offering that gave it a valuation of $3.5 billion. Co-founders Taavet Hinrikus and Kristo Kaarmann retain more than 80% of their shares, and none of the firm’s institutional investors sold theirs as part of the offering. The big winners here were the Estonian-British company’s employees, who, in Hinrikus’s phrasing, got to turn their “monopoly money” stock options into “real dollars.” Bloomberg
Tencent chief Pony Ma is monitoring the U.S.-China trade war to see if it turns into a “tech war,” he told Chinese media. Ma: “If we don’t continue to work hard on basic research and key technologies, our digital economy will just be a high-rise built on sand, difficult to sustain.” CNBC
What’s it like starting out these days? Check out McKenna Moore’s new Entry/Level series for Fortune, in which she interviews an Amazon user experience designer, an assistant merchant at J.Crew-owned Madewell, and an associate account strategist at Google—all just 23-years-old, yet all equipped with some sage advice.